Location Notebook: Tennessee - A Place to Grow Headquarters Operations

1/18/2018

A pro-business environment is helping Tennessee to attract headquarters operations and grow its business and professional services sector, while its quality of life draws workers to the state.

Ask a person on the street what makes the Tennessee economy tick, and the answer might be “the music industry”…perhaps “auto manufacturing”…or maybe “tourism.” Those are all excellent answers, and they certainly aren’t inaccurate.

Another great answer is one that sometimes flies a bit under the radar. Business headquarters are a growing key to the state’s economic success, along with other professional and business services.

The fact is, Tennessee has seen strong growth in these types of jobs in the past several years. In percentage growth, it leads the Southeast and is third nationally. Consider that the Fortune 500 list of the most prominent companies includes nearly a dozen Tennessee headquarters, along with countless other noteworthy collections of white-collar jobs. Total employment in professional and business services is more than 415,000…and counting.

Some Recent Examples

International health technology giant Philips, for example, recently picked the Nashville region for its new “center of expertise.” It’s a collection of a variety of functions, including commercial and customer-service operations, finance, HR, IT, marketing, and other specialties. According to Craig Gruchacz, the company’s global business services leader for North America, “The consolidation of our business services will help us to deliver on our continuous-improvement goals, with a particular focus on our customer experience, while leveraging the benefits of the growing health technology ecosystem in Tennessee to accelerate patient care.”

It’s a strategy of streamlining operations, says Bob Rolfe, commissioner of the Tennessee Department of Economic and Community Development. Consolidating these operations will help the company standardize its business processes, better digest future acquisitions, and keep improving customer service. Tennessee is an ideal place for this kind of activity, Rolfe says, which is why the state is very active in making connections with multinational companies such as Philips. “We were very successful with the Philips opportunity to come to Nashville,” he notes.

Also locating in Tennessee is CKE Restaurants Holdings, parent company of the Hardee’s and Carl’s Jr. burger chains that operate more than 3,600 locations. The holding company picked the Tennessee community of Franklin for its new corporate headquarters, which had been in California. The headquarters of the company’s Hardee’s group moved in from a St. Louis base. Nashville was also the North American headquarters choice last year of Hankook Tire, which already had picked Tennessee for a massive tire production facility. Bridgestone America is headquartered in Nashville too, and other significant professional services developments in recent years in Middle Tennessee include UBS, Warner Music, Jackson National Life Insurance, and Schneider Electric USA.

Professional and business services hubs are sprouting across the state, in fact. To the east, firearms manufacturer SCCY Industries picked Maryville for a facility that will combine production with headquarters operations. In announcing the choice, company founder and CEO Joe Roebuck said human capital made Tennessee stand out: “Success all comes down to people, and Tennessee seems to boast a good old-fashioned American work ethic.”

And to the west, Sedgwick Claims Management Services chose to expand its corporate headquarters in Shelby County, creating 150 new Memphis jobs. The project, announced in February 2017, will consolidate the company’s headquarters and R&D functions.

A Pro-Business Environment

What’s behind the growth in headquarters operations and other professional services operations in Tennessee? “I think it’s the quality of life and the very pro-business environment,” Rolfe says. “They like it that we don’t have a personal income tax, and being in the Central time zone, and also air service that includes nonstop service to more than 50 markets across the U.S.”

A major example of the pro-business environment is the hands-on economic development involvement of Gov. Bill Haslam, according to Rolfe. “He is very involved in recruiting, not only in the U.S. but around the globe,” Rolfe says, speaking via phone from South Korea, where he accompanied the governor on an economic development trip.

Landing a headquarters operation also depends on being able to offer solid educational resources, both for ease in filling open jobs with qualified locals, and for creating an attractive environment for those executives who would be called upon to relocate to Tennessee from headquarters elsewhere. “We have a pro-education strategy,” Rolfe says.

For example, he continues, through the Tennessee Promise program, the state ensures that all who graduate from high school in Tennessee can continue on to technical college or a two-year community college program at no cost. “That program is about two years old, and we’re seeing nice returns,” he says.

It’s so successful, in fact, that the state is expanding the deal so that free community college is available to all adults who don’t already have an associate’s or bachelor’s degree, not just graduating high-schoolers. In a statement discussing the first-in-the-nation Tennessee Reconnect concept, the governor said, “If we want to have jobs ready for Tennesseans, we have to make sure that Tennesseans are ready for jobs, and there is no smarter investment than increasing access to high-quality education.”

“We think the education investment is going to pay great dividends, no question about it,” Rolfe says. “We also feel that as we continue to announce additional jobs, we’re going to be recruiting human capital to the state.”

Attracting Human Capital

That’s an important point, because otherwise Tennessee runs the risk of becoming the victim of its own job-creation success. “In our case, we’re down to 3 percent unemployment,” Rolfe observes. “That does create its share of healthy challenges.”

It certainly helps that many headquarters operations bring along some of their own people. “These companies are moving some of their most senior executives. With those come some significantly high-paying jobs,” Rolfe says.

Beyond that, the hot economy, lack of an income tax, and attractive quality of life are magnets for attracting human capital, and the Tennessee Promise and Tennessee Reconnect programs will continue to boost the availability of qualified labor. And companies are responding with confident moves. That includes those choosing to move to Tennessee, Rolfe says, but just as significant are the existing companies that are confidently choosing to expand in Tennessee. In fact, he notes, more than two thirds of the new jobs last year were the result of expansion. He counts those moves as indications that the companies feel they made a good choice in originally picking Tennessee. “It’s a very healthy sign,” he concludes.

Source: Area Development, by Steve Stackhouse-Kaelble

The East Tennessee Economic Development Agency markets and recruits business for the 15 counties in the greater Knoxville-Oak Ridge region of East Tennessee. Visit www.eteda.org